COMMENT: Libor banking scandal that won't go away

Libor is the scandal that refuses to die. It is not that surprising given that reference interest rates, such as Libor, set the cost of credit for almost every transaction in the business world.

These can range from controversial interest-rate swap facilities allegedly mis-sold to companies including Guardian Care Homes, currently at the centre of a High Court hearing in London, to big syndicated loans raised by multinational corporations.

In the latest revelations, the Libor affair has manifested itself in two ways. Firstly, it has drawn into the investigatory web the world’s leading interdealer broker ICAP.

Knock-on effect: The Libor affair has drawn into the investigatory web the world¿s leading interdealer broker ICAP

It acts as an intermediary among the large investment banks and is being scrutinised for its part in setting interbank rates. ICAP’s involvement potentially could be an embarrassment in that the company is largely the creation of top Tory Michael Spencer – who is also an outspoken defender of the City.

Investors did not much like it either and marked the shares down heavily.Barclays – that hoped it had cleared the decks of its Libor involvement by being the first bank to settle with the authorities – also finds itself back in the spotlight.

A High Court judge involved in the Guardian Care Homes case has required the bank to disclose an anonymous list of names, whose emails were scrutinised by the authorities, even though many of them had no direct link to rate rigging.

Among those to find themselves in the spotlight were former Barclays chief executives John Varley and Bob Diamond as well as the current head of investment banking Rich Ricci. Barclays was unsuccessful in shielding their identities.

We are still at the foothills of the Libor affair. Swiss bank UBS is the biggest culprit of rate fixing seen so far.

But the shadow of disciplinary action still hangs over Royal Bank of Scotland and several other global players. As privately-funded legal cases work through the system, banks other institutions, that once felt that they were free and clear of broad based market manipulation, may find they have more answers to provide.

There will be more blood on the carpet.

Splitting roles Few top financiers on either side of the Atlantic survived the 2008-09 ‘great panic’ and lived to tell the tale.

Among the high profile escapees is Lloyd Blankfein of Goldman Sachs who remains ensconced as chairman and chief executive.

He remains in place despite the broker-dealer’s admissions of wrongful behaviour to the Securities & Exchange Commission and its attachment to the fat cat bonus culture at the heart of the sub-prime meltdown.

For the second year in a row Blankfein finds himself at the centre of a campaign seeking to split the chairman and chief executive’s role in line with best British, but not American, practice.

The effort to dislodge him from the chairman’s job is being led by CtW Investment Group that represents unions with 5.5m members and $200billion of assets.

Goldman has written to the SEC asking that the motion tabled for its agm be struck down. It is also seeking to strike out requests that the company set up a human rights committee and desist from making large scale political donations.

Whenever it is criticised Goldman traditionally argues that it gives back as much to the community as it takes out and lists the host of its people doing public service jobs.

Cynics might perhaps think that it is quite useful having the company’s alumni running the world’s central banks and finance ministries.

What is indisputable, however, is that vesting so much power in Blankfein has not served the bank well in terms of reputation.

A strong independent chairman might bring a new perspective to the company that at times seems to have ‘tin ears’ when it comes to public opprobrium of its behaviour.

And if it really is so concerned with the future of the world adhering to a human rights agenda might be just the thing.